In 2009, the economy was near collapse before pulling back from the brink of depression. Unemployment topped 10 percent, but layoffs eased. General Motors and Chrysler toppled into bankruptcy and emerged smaller and leaner. The Dow Jones industrial average swooned to a 12-year low, then came part of the way back.
It was a year of payback for having lived beyond our means — from Wall Street bankers who devoured risk they couldn't manage to ordinary Americans living in homes they couldn't afford with mortgages they didn't understand.
It was a year of finger-pointing over blame for the worst recession since the Great Depression. Americans pondered how long it would take to mend shattered nest eggs, livelihoods, government balance sheets and economic confidence.
It was a year that gave birth to buzzwords — "new frugality," "new normal" and "green shoots" — that captured the fragility of America's recovery.
The economy's wild ride was voted the top business story of the year by U.S. newspaper editors surveyed by The Associated Press. The collapse of the U.S. auto industry came in second, followed by skyrocketing home foreclosures.
1. ECONOMY'S FALL — AND REBOUND: In the first three months of the year, the economy suffers its worst slide in 27 years. The Federal Reserve, which already had slashed interest rates to a record low, plows money into the economy in new and novel ways.
After four quarters of decline, the economy returns to growth during the July-to-September period, signaling the end of the deepest and longest recession since the 1930s.
The rebound is sluggish and powered mainly by government stimulus to entice people to buy homes and cars. In the meantime, the unemployment rate tops 10 percent for only the second time since World War II.
A total of 15.4 million people are unemployed, and work remains scarce. The recession wipes out 7.2 million jobs. The Federal Reserve says it could take five or six years for the labor market to return to normal.
Americans' nest eggs are starting to heal. Yet experts say it will take years to recoup their losses. Net worth rose 5 percent last quarter but remains far below its pre-recession peak.
2. AUTO INDUSTRY COLLAPSE: U.S. auto sales plunge to a 26-year low, hastening General Motors' and Chrysler's collapse into bankruptcy and government control. Both companies emerge much smaller.
GM axes several major brands, including Saturn, Pontiac and Hummer, and thousands of dealerships. In March, CEO Rick Wagoner is ousted by the government. His replacement, 25-year GM veteran Fritz Henderson, is ousted in December. Chairman Ed Whitacre replaces Henderson even though the former AT&T CEO acknowledges knowing little about cars.
Chrysler emerges from bankruptcy under the control of Italy's Fiat. In November, Chrysler announces a five-year plan to spend $23 billion to overhaul or replace all of its Chrysler, Dodge, Jeep and Ram models by 2014. Much of the overhaul includes cost savings from combining purchasing and engineering with Fiat, and using Fiat's smaller, more fuel-efficient designs to replace aging Chrysler vehicles.
3. FORECLOSURES HEAD HIGHER: Home foreclosures top 4 million, as more people lose their jobs and can't afford to pay their mortgages. As a result, increasing numbers of people with fixed-rate loans and good credit are losing their homes.
The Obama administration's plan to help financially strapped homeowners, announced in March, results in 680,000 loan modifications, far short of the government's goal of up to 4 million.
By the end of the year, a record 14 percent of homeowners with a mortgage are either behind on their payments or in foreclosure. Bargain-priced foreclosures are dragging down home values in neighborhoods across the country. Nationwide, American homeowners have lost $4 trillion in home equity since the housing bust.
4. WALL STREET CLAWS BACK: In March, major stock indexes tumble to 12-year lows. Then the fever breaks. Seven months later, in October, the Dow Jones industrial average is back above 10,000 and still advancing. In the nine months since the turnaround took hold, the Dow scoops about 3,900 points, or 59.5 percent, on signs that layoffs are slowing, corporate profits are climbing and factories are producing more.
5. SMALL AND MID-SIZE BANKS FAIL: 140 banks collapse as consumer loan losses keep rising and commercial real estate loans sour. It's the biggest number in any year since 181 banks failed in 1992 at the end of the savings-and-loan crisis.
The banks have been undone by real estate, construction and industrial loans that soured as the recession has deepened. Defaults are up as developers abandon failing projects and landlords can't meet their loan payments.
Small- and mid-sized banks hold lots of those loans and have been hurt more than big institutions by the sinking commercial real estate market, especially in states like California, Georgia and Illinois. As defaults rise, these banks must set aside more money to cover losses.
6. U.S. SPILLS RED INK: The federal deficit triples to record $1.4 trillion as financial bailout and war costs soar. It's more than the total national debt for the first 200 years of the Republic, more than the entire economy of India, almost as much as Canada's, and more than $4,700 for every man, woman and child in the United States.
7. MADOFF SCANDAL: Disgraced financier Bernard Madoff is sentenced to 150 years in prison for his multibillion-dollar Ponzi scheme. A year after Madoff's scheme collapsed in December 2008 — with headlines of $50 billion in losses — investigators and investors are still struggling to measure the full scope and impact of the largest securities fraud in history.
8. FEDERAL AID FOR ECONOMY: Government stimulus programs spur sales of homes and autos but raise doubts about whether the economic recovery can be lasting if federal aid is withdrawn.
9. A NEW FRUGALITY: Consumer spending, which accounts for about 70 percent of U.S. economic activity, shows tentative improvement but remains far below pre-recession levels. Evidence mounts that many Americans have become lasting coupon-cutters, scrimpers and savers. Consumer confidence in November rises to 49.5 from 48.7 in October. A reading above 90 means the economy is on solid footing; above 100 signals strong growth.
10. FINANCIAL REFORM STALLS: An Obama administration plan to overhaul regulation of financial industry slows over industry opposition and renewed signs of a stabilized financial system. The House approves a plan in December that would grant the government new powers to split up companies that threaten the economy, create an agency to oversee consumer banking transactions and shine a light into shadow financial markets that have escaped federal oversight. But the legislation faces an uncertain future in the Senate.